Chip company Applied Materials (AMAT) expects to see a drop in spending from China next year because of stricter U.S. export rules. These rules are meant to stop companies (especially in China) from using their partners or subsidiaries to get around restrictions on buying chipmaking tools. Since China has been the biggest buyer of this equipment since 2020, these measures have taken a toll on Applied Materials and similar companies.
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Even so, analysts think that the damage to Applied’s overall sales might not be too severe. That’s because the company has already reduced how much of its revenue comes from China. More precisely, just over 20% of sales come from the country, compared to nearly 40% a few years ago. Applied also said that it expects stronger overall revenue in the second half of Fiscal Year 2026, which could help balance things out. However, one positive update is that the U.S. has paused a key export restriction, known as the “affiliate rule,” following discussions between President Trump and Chinese President Xi Jinping.
Interestingly, Applied’s management team confirmed that this pause will result in approximately $600 million in additional sales this year. Still, CEO Gary Dickerson pointed out that foreign competitors are selling to Chinese firms that Applied can’t reach due to the remaining restrictions. This led analysts at Jefferies (JEF) to question whether Applied might be losing market share in China, but the company insists that isn’t the case.
What Is the Target Price for AMAT?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on AMAT stock based on 16 Buys, eight Holds, and one Sell assigned in the past three months. Furthermore, the average AMAT stock price target of $231.27 per share implies 3.5% upside potential.
